Dem opposition dooms Summers

Larry Summers on Sunday withdrew his name from consideration as chairman of the Federal Reserve, a defeat for President Barack Obama — who could not convince members of his own party to shelve their opposition to his former top economic adviser.

Summers, who previously served as Treasury secretary in the Clinton administration, director of the National Economic Council and president of Harvard, notified President Barack Obama of his decision with a phone call Sunday morning.

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“Larry was a critical member of my team as we faced down the worst economic crisis since the Great Depression, and it was in no small part because of his expertise, wisdom, and leadership that we wrestled the economy back to growth and made the kind of progress we are seeing today,” Obama said in a statement Sunday. “I will always be grateful to Larry for his tireless work and service on behalf of his country, and I look forward to continuing to seek his guidance and counsel in the future.”

During their call, Summers told Obama he believed there was now too much political opposition to his nomination to move forward, a person familiar with the phone call said. Summers told Obama that his nomination now would create too much political uncertainty for the Fed and could thus be damaging to the economy. Obama accepted Summers’ rationale and did not attempt to convince him to continue as a candidate for the Fed job, the person said.

Summers was a top initial candidate for the Fed job among senior current and former White House officials. Obama was also inclined to appoint Summers to the post, people close to the White House said. But the longer time dragged on without a nomination, the more liberal groups and some Democratic senators were able to organize to oppose Summers, who many on the left viewed as too close to Wall Street and not strong enough on financial regulation.

Opposition to Summers among Senate Democrats has been obvious for weeks but it escalated on Friday when Sen. Jon Tester (D-Mont.) announced he would vote against Obama’s former economic adviser if he was nominated.

At least three other Democrats on the Senate Banking Committee were expected to oppose Summers — Sherrod Brown (D-Ohio), Jeff Merkley (D-Ore.) and Elizabeth Warren (D-Mass.) – raising the politically uncomfortably scenario of Obama needing to rely on Republican votes just to get his choice for a Fed chief out of committee.

Obama has said the other candidates for the job are Fed Vice Chair Janet Yellen and former Fed Vice Chair Donald Kohn. But Summers was said to be the president’s first choice and it’s unclear if he will fall back on one of these two candidates or look elsewhere.

Liberal Democrats’ chief complaint with Summers has been the role he played in deregulating financial markets when he served as Treasury Secretary during the Clinton administration. Some, like Merkley, also argued that during the Obama administration, Summers fought against reforms they favored like the trading restrictions known as the Volcker rule.

Earlier this summer, about a third of Senate Democrats signed a letter to Obama endorsing Yellen and progressive and women’s groups have also sounded their support for her nomination.